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Increased Focus on FARA Registrations Is Likely - What Businesses Need to Know

A once-overlooked federal criminal law, the Foreign Agents Registration Act (“FARA”), is now at the top of the news. Enacted in 1938 to control Nazi propaganda, FARA requires U.S. firms that represent foreign entities to register with the U.S. Department of Justice, disclose their advocate-client relationship in their communications, and file reports. 22 U.S.C. §§ 612-619. Russia’s efforts to influence U.S. policy and the 2016 election have given this old law new prominence. On October 30, the Special Counsel in the Russian collusion investigation unsealed the indictment of former Trump campaign manager Paul Manafort and his business associate on twelve counts, including failure to register under FARA (Count 10) and making false and misleading statements regarding his firm’s compliance with the law (Count 11). The indictment, moreover, identifies failure to register under FARA as “specified unlawful activity” that justifies the conspiracy to launder money charge in Count 2.

A Broadly Written Law. As written, FARA provides straightforward elements that simplify the government’s efforts to charge and prove violations. Exemptions are limited. The Department of Justice has not prioritized FARA enforcement in recent decades, bringing only seven cases since 1966. Yet this criminal law is a major element in both the Manafort indictment and congressional investigations of Fusion GPS’ role in the “Steele Dossier” controversy. It gives prosecutors another hammer, like convicting Al Capone of tax evasion rather than murder, extortion, or other criminal felonies. To the extent alleged FARA violations are more straight-forward to prove, and correspondingly harder to defend against, the Special Counsel also has considerable leverage over the accused to obtain their cooperation in the broader investigation.

To convict a defendant of violating FARA, a prosecutor must prove the following elements:

The defendant acted as an agent, employee, or in any other capacity at the order, request, or under the direction or control of a “foreign principal” (i.e., a foreign government or political party, an individual who is not a U.S. citizen and domiciled within the United States, or a business or other organization that is not organized under the U.S. federal or state law or has a principal place of business outside the United States), or otherwise agreed, consented, or held himself out as an agent of a foreign principal;

The defendant engaged in any of the following activities within the United States on behalf of the foreign principal:

Political Activities – Attempting to influence an official or agency of the U.S. Government or any section of the U.S. public regarding U.S. foreign or domestic policy, or with reference to the political or public interests, policies or relations of a foreign government or political party;

Public Relations Counsel – Advising on any public relations matter pertaining to the foreign principal’s political or public interests, policies, or relations;

Political Consultant – Informing or advising the foreign principal regarding U.S. Government domestic or foreign policies, or the public interest, policies, or relations of a foreign country or political party;

Fundraising – Soliciting, collecting, or dispensing contributions or other things of value for or on behalf of the foreign principal; or

Other Representation – Representing the interests of a foreign principal before any federal government official or agency;

The defendant willfully failed to file a true and complete FARA registration within 10 days of becoming an agent of a foreign principal or violated any other requirement of the act (e.g., reporting, labeling, or document retention); and

No exemption applies, such as the following commonly available exemptions:

Engaging in “private and nonpolitical activities in furtherance of the bona fide trade or commerce” of a foreign principal (the “Commercial Exemption”);

Legal representation by lawyers in judicial proceedings, criminal or civil investigations, or agency proceedings that must be conducted on the record;

Engaging in any amount of “lobbying activity,” as defined by the Lobbying Disclosure Act of 1995 (“LDA”), at 2 U.S.C. §§ 1601-1614. (the “LDA Exemption”), on behalf of a foreign principal that is not a foreign government or political party, and registering that client relationship with Congress, under the LDA;

A U.S. news organization’s “bona fide news or journalistic activities”;

Soliciting contributions for use limited to medical assistance or food and clothing “to relieve human suffering”; or

Furthering bona fide “scholastic, academic, or scientific pursuits or of the fine arts.”

The government need not prove any threshold level of activity or payment, the existence of a contract, or the foreign principal’s specific identity. The failure to file registration statements or semiannual reports is a “continuing offence” to which no statute of limitation applies. And FARA establishes personal liability for an agent’s officers and directors regarding the organization’s violations, even if the organization has disbanded. FARA applies to more than just lobbying and public relations firms. Management companies, service vendors, and consultants in fields outside politics are at risk, too. Providing services in the United States to a foreign government’s economic development office could, for example, trigger FARA registration.

Enforcement Trend. In recent years, the Department of Justice has paid increased attention to representation of foreign principals from certain countries: Russia, China, Saudi Arabia, Qatar, Ukraine, and other former Soviet republics. This trend began in response to lobbying and public relations firms’ U.S. advocacy to end sanctions levied against Russian entities (e.g., the 2012 Magnitsky Act) and only accelerated with concerns regarding Russian interference in the 2016 presidential election. Days after the Manafort indictment’s release, Senate Judiciary Chairman Chuck Grassley (R-IA) and House Judiciary Committee Bob Goodlatte (R-VA), introduced identical bills to strengthen FARA. Specifically, this legislation would:

Repeal the LDA Exemption discussed above;

Require FARA registrants that represent foreign individuals, companies, or other private sector entities (i.e., the foreign principals covered previously by the LDA Exemption) to file FARA reports on a quarterly instead of semiannual basis; and

Authorize the Department of Justice to compel the production of documents and testimony—even in the absence of a formal investigation or subpoenas—by any person believed to have information relevant to enforcement of FARA, and to use the results of such “civil investigation demands” in criminal proceedings.

Better Late Than Never. The Department of Justice uses a “carrot” approach in addition to the “stick” of enforcement. It encourages U.S. service providers to come into compliance even if they have missed the registration deadline. Beyond lobbying firms, U.S. businesses that provide communications services to foreign clients or parent companies should review this law and its exemptions closely. Congress wrote the law broadly to regulate Nazi sympathizers’ advocacy and did not strike it after winning World War II. The exemption most frequently available to U.S. businesses, the Commercial Exemption, covers providing purely commercial and non-political services to a foreign company (for example, advertising an Italian car manufacturer’s products, but not the Italian government’s policy concerns). Another, the LDA Exemption, covers lobbying and public relations work for a private sector client, but does not apply when the foreign principal is a government or political party (and may be repealed by the proposed legislation discussed above). These exemptions’ terms are narrow. Due care in ascertaining whether an exemption may apply, and in staying within the exemption’s limits, is critical.

Proactive Compliance. Businesses can address FARA compliance inquiries much more effectively if they have reviewed whether this law applies to their activities before reporters call. Proactive reviews can, more importantly, spot compliance errors before receiving that call, or worse, a letter from the Department of Justice. Closing compliance gaps before attracting public notice is always more effective and less costly than when compelled to do so in response to inquiries from the press or enforcement agencies.